What Costs Can I Include in a Mechanics Lien?

I practice law, and focus on construction law, in the states of Washington, Oregon and Louisiana.    Whenever folks are looking to put together a mechanics lien, this is a question that is very frequently asked.  (Previously wrote about it here).

While the question seems quite simple, it’s actually a bit complicated.   And it’s a very sensitive question to boot.   The answer differs depending on which state’s law applies, and some states are more sensitive to the topic than others.   In some states, if the lien amount is listed incorrectly, or includes costs not allowed under law, it could invalidate the entire lien.

In other words, tread very carefully.

So, what is this question asking anyway?   Well, folks are typically looking to include two different costs into the amount of its lien.   First, the cost of filing the lien itself.    This may be the cost of an attorney, the filing fees with the county, or the cost of our service ($295).   Second is charged interest on the unpaid account.   Sometimes this is the state’s judicial interest, or interest allowed by contract.

Let me make something very clear:   This is an extraordinarily complicated question to answer on a general basis.   You should consult with an attorney to figure out exactly what costs you can and should and may include in your lien.

However, let me take a crack at trying to answer this question generally.

In Louisiana, Washington and Oregon, if someone wants a general rule, I always advise my clients to simply file the lien for the amount that is due under the contract, without any of the extras.  I advise this unless there is specific circumstances and law that allow them to do the contrary, and they know the law.   I advise this simply in an abundance of caution for these two reasons:

1) If you include it (the extra costs), and you cannot include it, it could invalidate the lien; and

2) if you do not include, it doesn’t mean you can’t collect it. It just means its not part of your lien, and you don’t have the lien against those particular funds (you still have any legal or contractual right to it).

What Costs / Labor To Include In Your Lien?

It’s been an interesting week on the web as it relates to mechanic’s liens, as I’ve run across a number of web posts about the types of services that can be included in a lien.

Let’s look at the matter theoretically.   Construction lien laws are normally drafted to protect contractors, who invest labor and expense into the improvement of a property.  However, since the laws also balance the property rights of persons or organizations, each state certainly does something to qualify what types of labor and expense can be represented in a lien, and which cannot.

The question here, therefore, is quite simple:   have you performed work or provided materials that can be the subject of a lien?

It’s one of the most important questions a contractor or supplier can ask when determining how to best collect on a non-paying account or project.   If you work does not qualify for a lien, for example, there is no need to even consider if notice is required and other lien filing requirements.

It’s important to consult the laws or your particular state to determine what type of materials and labor can be the subject of a lien, and which cannot.  However, two recently decided cases in Virginia and Kentucky are revealing of some general principals that are followed by most states.  The principal is essentially this:  you can only lien for labor and materials that actually go into improving the property.

What does this exclude?

In Virginia, Virginia Lawyers Weekly reports that a Hanover County Circuit Court invalidated a mechanic’s lien filed by a contractor that incurred costs in anticipation of construction of a steel building, but did not provide labor or materials actually employed in construction of the building.

The case is captioned Dallan Construction Co. v. Super Structures General Contractors, Inc, and can be downloaded here.

Similarly, in Kentucky, the Kentucky Court of Appeals held that “mowing, trimming, edging and street cleaning” did not “permanently improve the property,” and therefore, a mechanics lien was not allowed to be filed for the services provided.  That case is discussed at the South Carolina Community Association Law Blog, and is captioned Steeplechase Subdivision Homeowners Association, Inc. v. Thomas, Ky. Ct. App. 2008.

Caution: Lien Laws in are Hyper-Technical

In most states, the liens laws are hyper-technical.   This means that the laws have many requirements, and that courts strictly construe the rules against the party filing construction liens.

This is true for nearly every state.

While laws across the nation provide lien rights to those in the construction industry, because of the power of these instruments most states require that the liens be filed in exact accordance with the law to be valid.

This is especially the case with regard to the required contents of a lien.

Each state has different requirements for what must be stated within a mechanic’s lien, and how that information must be stated.

Every state, for example, will require the claimant to identify the property being liened.  In Louisiana, Washington and Virginia, however, the law requires that the lien use the legal property description and not simply a municipal address.   The proper identification of property can be so important we’ve written an entire blog post about it here.

In Virginia, the laws are even stricter.   Because the Virginia lien law is land record based, the claimant is expected to perform a complete title search to acquire the exact legal owner and legal property description.   A lien that does not lien the exact owner, at the exact property for the exact amount due, can be deemed invalid by courts.

Express Lien does this leg work for your company, helping your company properly prepare these important legal forms.   Our professional legal document preparers are familiar with the lien and notice forms in your state, and can help your company Lien Smarter.

Be Careful When Using Free Legal Forms

Gerard Simington with “FindAnAttorneyForMe.com” published an informative article that warns businesses about using free legal forms found on the internet.

The Internet has placed legal information and legal forms at our fingertips – and its easy to forget sometimes that the law is a very complicated subject, and legal forms are no exception.  While a legal form may seem simple on its face, the blanks can carry significant legal consequences.

It’s always great to hire an attorney to draft legal documents from scratch, or to “tweak” legal forms to fit your particular need.   The costs associated with legal counsel, however, are simply sometimes out of your business’ reach.

Legal Document preparation services like Express Lien are perfect for these situations.  Our staffs of professionals are familiar with the forms that relate to your construction project, and we can help you draft & file your forms properly and avoid costly mistakes.

7 Habits of Contractors Who Lose Money…and How to Break Them

The Construction Commando’s “Contractor’s Secret Weapon” published an article with this title that described seven instances when contractors lose money on a project.  While the article was drafted to an audience of California contractors, the habits apply nationwide.

It will be to any contractors’ benefit to review this article online, access which habits apply to you, and make an effort to avoid the costly mistakes.  Any progress will help increase your bottom line.

The seven habits highlighted are:

1)    The “Gentlemen’s Agreement” – A Handshake and Your Word.   Bottom line:  Get it in writing.
2)    Using Contracts that Fall Short of the Legal Requirements.
3)    Not Getting Every Change Order in Writing.
4)    Failing to invoice immediately.
5)    Failing to serve a preliminary 20-day notice (pre-lien construction notices)
6)    Don’t Worry – They Will “Take Care of You” on the Next Job
7)    It isn’t good “customer service” to record a Mechanic’s Lien

New Georgia Lien Laws Go In Effect April 2009

In the spring of 2008, a senate advisory committee in Georgia completed a report on the state’s lien laws, and proposed a bill to make certain substantive changes to OCGA 44-14-361 et seq., which houses Georgia’s lien laws.

The first paragraph of the report’s summary nicely explains the challenges facing legislatures when drafting and re-drafting lien laws:

The Lien Law Study Committee was born out of concern for homeowners coupled with respect to private enterprise.   Indeed, there are frustrated and worried homeowners who have had liens filed against their real property despite the fact that these homeowners have paid in full for services rendered.   Conversely, there exist disappointed, hard-working homebuilders, subcontractors and suppliers who have provided goods and services yet have received no payment.

The bill – which is described as a “fair and balanced lien law” by the Georgia Lien Rights Coalition, was passed by the Georgia legislature earlier in 2008.

The bill (Senate Bill 374) will become law in Georgia on March 31, 2009.  It’s important that contractors, subcontractors, suppliers, property owners and all others affected understand the changes, as it can affect each’s lien rights.

Great summaries of the changes are provided by the Georgia Lien Rights Coalition on its site.

General Changes:

1. Lien Deadlines are worded in days instead of months.  So, for example, instead of requiring a lien to be filed within an ambiguous “3 months,” liens must now be filed 90 days from labor, services or materials last supplied to the property;
2. Day Counting is now more consistent with Georgia law.  If a deadline fills on a weekend or public holiday, it will be extended to the next business day.  Previously, the deadline would be moved up to the preceding business day.
3. Definitions are clarified.

Changes that Benefit Suppliers or Subcontractors

1. Notice of Bond to Remove Lien: Previously, a property owner could bond out a lien without ever notifying the subcontractor or supplier.  The new rules close this lophole by requiring property owners to notify lien claimants that the lien has been bonded off the property.
2. Deadlines: All deadlines in the Georgia lien laws are made clearer by the new bill.  Here are some important deadline changes:
   1. Liens must be filed within 90 days from labor, services or materials last supplied to the premises (previously 3 months);
   2. Notice of Lien filing must be sent to property owner within 2 business days from filing of claim of lien;
   3. Lien must be perfected within 365 days from w hen lien filed (previously 1 yr from labor, services or materials last supplied);
   4. Notice of lawsuit to perfect lien must be delivered to owner within 30 days (previously 14 days).

Changes that Benefit General Contractors and Homebuilders

1. Prior law was inconsistent and confusing as to whether general contractors or homebuilders were required to receive copies of filed liens.  The new law states that when a “Notice of Commencement” is filed on the project, the general / homebuilders must receive notice of the lien.
2. The Lien Waiver Forms have been made more clear, with bold, capital letters explaining what the waiver means.

Changes that Benefit Property Owners

1. New Notice of Contest: Owners can now send a “Notice of Contest” to contractors who file a claim of lien.  The notice sets forth that the Owner contests the debt, and requires that a lawsuit to perfect the lien be filed within 60 days.  If a suit is not filed within the 60 day period, the lien is invalidated.
2. Expiration Date on Lien: The new rule requires that the Claim of Lien itself include a statement as to when it expires.

For more information about the revised law, you can view the Senate Bill 374 here, and you can read about hte new rules at the Georgia Lien Rights Coalition website.

Express Lien continues to monitor the lien law changes in Georgia, as it does in every state.  When the new rules go into effect on March 31, 2009, the Express Lien, Inc. forms will be updated to meet the new requirements.

Our service prepares and files Claims of Lien for contractors, subcontractors and suppliers throughout the state of Georgia.  We also send Notices of Lien to the interested parties, can prepare and send Notices of Contest for Georgia property owners, and prepare and file lawsuits to perfect your construction liens.

Save you company time and money, and ensure that your Georgia liens are filed professionally with Express Lien.

Top 10 Construction Lien Errors

Debb & Derkin, P.A., a law firm practicing construction law in Florida and filing construction liens in that state, published an article listing the Top 10 Construction Lien Errors.

While the article and Top 10 listing is related to Florida lien laws, since most lien laws in the U.S. are substantially similar, the same errors appear time and time again on liens across the nation.

The Top 10 Lien Errors highlight by Mr. Debb in the article are:

1. Failure to Timely Serve Notice to the Owner
2. Failure to Serve Notices on Proper Parties
3. Failure to Serve Notices by Proper Method
4. Contingent Payment Clauses
5. Overstatement of Amounts Due and Owing
6. Failure to Respond to Sworn Statement Requests
7. Failure to Timely File a Claim of Lien
8. Failure to Provide Copy of Claim of Lien
9. Failure to Foreclose on Claim of Lien within Time Required by Statutes
10. Failure to Secure Proper Licensing

Express Lien, Inc. is experienced in filing construction liens in states across the country, and ensuring that your lien is filed professionally and accurately. Trust your next construction lien to our professionals.

It’s why we say: Lien Smarter…Get Paid.